Ehrlich v. City of Culver City

Page 242

50 Cal.Rptr.2d 242

12 Cal.4th 854, 911 P.2d 429, 96 Cal. Daily Op. Serv. 1542,

96 Daily Journal D.A.R. 2558

Richard K. EHRLICH, Plaintiff and Appellant, v. CITY OF CULVER CITY et al., Defendants and Appellants.

No. S033642.

Supreme Court of California.

March 5, 1996.

Rehearing Denied April 11, 1996. ^*

Edward J. Horowitz, Los Angeles, and Lisa S. Ehrlich, Redondo Beach, for Plaintiff and Appellant.

Paul B. Campos, San Ramon, Nicholas Cammorata, Diamond Bar, Ronald A. Zumbrun, Sacramento, Edward J. Connor, Jr., Sacramento, Timothy A. Bittle, Sacramento, James S. Burling, Sacramento, Daniel J. Popes, Paul D. Kamenar, Rubenstein & Bohachek, Earl L. Bohachek, McCutchen, Doyle, Brown & Emerson, Maria P. Rivera, Stephen L. Kostka, Geoffrey L. Robinson, Barbara J. Schussman, Cox, Castle & Nicholson, Los Angeles, and Kenneth B. Bley, Los Angeles, as Amici Curiae on behalf of Plaintiff and Appellant.

Norman Y. Herring, City Attorney, Evelyn Keller and Carol Schwab, Deputy City Attorneys, Freilich, Kaufman, Fox & Sohagi, Benjamin Kaufman, Kane, Ballmer & Berkman, Michael D. Montoya, Pamela S. Scmidt and Joseph W. Pannone, Los Angeles, for Defendants and Appellants.

Daniel E. Lungren, Attorney General, Roderick E. Walston, Chief Assistant Attorney General, Jan S. Stevens, Assistant Attorney General, Richard M. Frank and Linus Masouredis, Deputy Attorneys General, Louise H. Renne, City Attorney (San Francisco), Andrew W. Schwartz, Deputy City Attorney, David R. Chapman, City Attorney (Escondido), Jeffrey R. Epp, Assistant City Attorney, Sharon Dennis, John Echeverria and Mary Minette as Amici Curiae on behalf of Defendants and Appellants.

ARABIAN, Justice. ^*

This case comes to us by a circuitous route, having been remanded after the United States Supreme Court issued a writ of certiorari to the Court of Appeal and vacated that court's judgment in favor of defendant City of Culver City. The high court's order of remand directed the Court of Appeal to reexamine its prior judgment "in light of Dolan v. City of Tigard (1994) 512 U.S. 374, 114 S.Ct. 2309 [129 L.Ed.2d 304]...." (Ehrlich v. City of Culver City (1994) 512 U.S. 1231, 114 S.Ct. 2731, 129 L.Ed.2d 854.)

Following remand, a divided Court of Appeal reaffirmed its earlier ruling in favor of defendant city in an unpublished opinion. We then granted the petition for review by plaintiff, a property owner and developer, to consider important and unsettled questions concerning the extent to which the high court's opinions in Dolan v. City of Tigard (1994) 512 U.S. ----, 114 S.Ct. 2309, 129 L.Ed.2d 304 (Dolan ) and the earlier case of Nollan v. California Coastal Commission (1987) 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (Nollan ) apply to development permits that exact a fee as a condition of issuance, rather than, as in both Nollan and Dolan, the possessory dedication of real property.

As we explain, we conclude that the tests formulated by the high court in its Dolan and Nollan opinions for determining whether a compensable regulatory taking has occurred under the takings clause of the Fifth Amendment to the federal Constitution apply, under the circumstances of this case, to the monetary exaction imposed by Culver City as a condition of approving plaintiff's request that the real property in suit be rezoned to permit the construction of a multi-unit residential condominium. We thus reject the city's contention that the heightened takings clause standard formulated by the court in Nollan and Dolan applies only to cases in which the local land use authority requires the developer to dedicate real property to public use as a condition of permit approval.

We arrive at this conclusion not by reference to the constitutional takings clause alone, but within the statutory framework presented by the Mitigation Fee Act. (Gov.Code, section 66000 et seq.) We will conclude in this case that, in order to avoid substantial questions concerning the constitutional sufficiency of the legislative standard embodied in the act, the tests formulated by the high court in its Dolan and Nollan opinions for determining when a regulatory taking has occurred apply here to the act's requirement that the local regulatory authority demonstrate a "reasonable relationship" between the monetary exaction and the public impact of the development.

We thus interpret the act's "reasonable relationship" standard, as applied to the development fee at issue in this case, as embodying the standard of review formulated by the high court in its Nollan and Dolan opinions--proof by the local permitting authority of both an "essential nexus" or relationship between the permit condition and the public impact of the proposed development, and of a "rough proportionality" between the magnitude of the fiscal exaction and the effects of the proposed development.

Applying this standard in this case, we conclude, first, that the city has met its burden of demonstrating the required connection or nexus between the rezoning--to permit a residential use of a parcel of land zoned for private recreational use--and the imposition of a monetary exaction to be expended in support of recreational purposes as a means of mitigating that loss. We conclude, however, that the record before us is in sufficient to sustain the city's determination that plaintiff pay a so-called mitigation fee of $280,000 as a condition for approval of his request that the property be rezoned to permit the construction of a condominium project. Because the city may be able to justify the imposition of some fee under the recently minted standard of Dolan, we follow the Oregon Supreme Court's disposition in that case and direct that the cause be remanded to the city for additional proceedings in accordance with this opinion.

I Factual and Procedural Background

A

Between 1973 and 1975, plaintiff acquired a vacant 2.4-acre lot on Overland Avenue in Culver City and obtained city approval to develop the site as a private tennis club and recreational facility. At plaintiff's request, the city amended its zoning and general plan ordinances governing uses on the property from a split zone R-1 (single family residential) and C-2 (retail commercial) to C-3 (commercial). A specific plan was also adopted by the city providing for the development of a privately operated tennis club and recreational facility. ¹ A report prepared by city planning officials in 1974 recommending approval of the development permit recognized that "the need for additional tennis facilities in this city is a real one"; the planning commission resolution recommending approval likewise observed that "[t]he proposed zoning of the property in conjunction with the specific plan will provide a suitably located area within the City for additional tennis club facilities in the form of a private tennis club." From 1975 to 1988, plaintiff, alone or through others, operated the sports complex--consisting by then of a swimming pool, five tennis courts, racquetball courts, and weight training and aerobic facilities--on the site.

In 1981, in response to financial losses, plaintiff applied to the city for a change in land use in order to construct an office building on the site; that application was abandoned after the city planning commission recommended against approval on the ground that the existing sports and tennis club provided a needed commercial recreational facility within the city. The club continued in operation under a series of managers until August 1988, when plaintiff closed it as a result of continuing financial losses. The following month, he again applied to the city for an amendment to the general plan, a zoning change and amendment of the specific plan to allow construction of a 30-unit condominium complex valued at $10 million.

Shortly after the submission of plaintiff's application, the city expressed an interest in acquiring the property for operation as a municipally owned sports facility and hired outside consultants to study the feasibility of the acquisition. The impetus behind the city's interest was a perceived deficiency in existing municipal recreational facilities. Buying the property, according to a city council staff report, offered the "opportunity to preserve an existing sports/recreational facility for public use and relieve pressure on existing facilities." The feasibility study concluded that, by national standards, the city was two to four tennis courts short, and deficient in the number of its public swimming pools and gymnasiums. The study also concluded that plaintiff's club had encountered financial problems through a combination of management problems, poor maintenance, and a lack of competitive amenities offered by other clubs. Without extensive capital improvements, the study concluded, the club could not "compete financially in today's health and fitness market."

Based upon the findings of the study, the city concluded that it lacked the funds to purchase and operate the club as a general public sports complex, and would incur substantial financial risks if it purchased and operated the club on a limited membership, fee-for-service basis. In April 1989, the city decided not to purchase the property. At the same time, the city council disapproved plaintiff's application based on concerns over the loss of a recreational land use needed by the community. In the meantime, plaintiff obtained a demolition permit and tore down the existing site improvements. The still useful equipment, including the tennis court lights, nets, and lockers, he donated to the city.

Following the rejection of his application, plaintiff entered into discussions with members of the city council and city staff in an attempt to restructure the project. He asserts that he was informed the project would not be approved unless he agreed to build new recreational facilities for the city. In response, plaintiff apparently raised the possibility of...